Louisiana Administrative Code
Title 61 - REVENUE AND TAXATION
Part I - Taxes Collected and Administered by the Secretary of Revenue
Chapter 11 - Corporation Income Tax
Section I-1134 - Determination of Louisiana Apportionment Percent
Universal Citation: LA Admin Code I-1134
Current through Register Vol. 50, No. 9, September 20, 2024
A. General. R.S. 47:287.95 provides for an apportionment percent that is to be applied to the taxpayer's total net apportionable income in determining the Louisiana net apportionable income. Specific formulas are prescribed for air, pipeline, other transportation businesses, and certain service enterprises. A general formula is prescribed for manufacturing, merchandising and any other business for which a formula is not specifically prescribed. The statute contemplates that only one specific formula be used in determining the apportionment percent, that being the formula prescribed for the taxpayer's primary business. As a general rule, where a taxpayer is engaged in more than one business, the taxpayer's primary business shall be that which is the primary source of the taxpayer's net apportionable income. When the numerator and denominator are zero in any one or more ratios in the apportionment formula, such ratio shall be dropped from the apportionment formula and the arithmetical average determined from the total remaining ratios.
B. Property Ratio
1. The value of immovable and corporeal
movable property owned by the taxpayer and used in the production of net
apportionable income is included in each formula except those provided for
certain service businesses and those using the single sales ratio under the
general formula. Where only a part of the property is used in the production of
apportionable income, only the value of that portion so used shall be included
in the property ratio. However, where the entire property is used in the
production of both allocable and apportionable income the value of the entire
property shall be included in the property ratio. Idle property and property
under construction, during such construction and prior to being placed in
service, shall not be included in the property ratio. Property held as reserve
or standby facilities, or property held as a reserve source of materials shall
be considered used. For example, a taxpayer who purchases a lignite deposit
that is held as a reserve source of fuel should include the value of such
deposits in the property ratio. Non-productive mineral leases are considered to
be held for such use and should be included in the property ratio. The value of
inventories of merchandise in transit shall be allocated to the state in which
their delivery destination is located in the absence of conclusive evidence to
the contrary.
R.S.
47:287.95(A)(1) provides
that aircraft owned by a taxpayer whose net apportionable income is derived
primarily from air transportation should not be included in the property
ratio.
2. Proration of Rolling
Stock and Other Mobile Equipment. The average value of rolling stock and other
mobile equipment owned by the taxpayer shall be prorated within and without
Louisiana as set forth below.
a. The value of
diesel locomotives shall be allocated to Louisiana on the basis of the ratio of
diesel locomotive miles in Louisiana to total diesel locomotive
miles.
b. The value of other
locomotives shall be allocated to Louisiana on the basis of the ratio of other
locomotive miles in Louisiana to total other locomotive miles.
c. The value of freight train cars shall be
allocated to Louisiana on the basis of the ratio of freight car miles in
Louisiana to total freight car miles.
d. The value of passenger cars shall be
allocated to Louisiana on the basis of the ratio of passenger car miles in
Louisiana to total passenger car miles.
e. The value of passenger buses shall be
allocated to Louisiana on the basis of the ratio of bus miles in Louisiana to
total bus miles.
f. The value of
diesel trucks shall be allocated to Louisiana on the basis of the ratio of
diesel truck miles in Louisiana to total diesel truck miles.
g. The value of other trucks shall be
allocated to Louisiana on the basis of the ratio of other truck miles in
Louisiana to total other truck miles.
h. The value of trailers shall be allocated
to Louisiana on the basis of the ratio of trailer miles in Louisiana to total
trailer miles.
i. The value of
towboats shall be allocated to Louisiana on the basis of the ratio of towboat
miles in Louisiana to total towboat miles. In the determination of Louisiana
towboat miles, one half of the mileage of all navigable rivers or streams
bordering on both Louisiana and another state shall be considered Louisiana
miles.
j. The value of tugs shall
be allocated to Louisiana on the basis of the ratio of tug miles in Louisiana
to total tug miles. In the determination of Louisiana tug miles, one half of
the mileage of all navigable rivers or streams bordering on both Louisiana and
another state shall be considered Louisiana miles.
k. The value of barges shall be allocated to
Louisiana on the basis of the ratio of barge miles in Louisiana to total barge
miles. In the determination of Louisiana barge miles, one half of the mileage
of all navigable rivers or streams bordering on both Louisiana and another
state shall be considered Louisiana miles.
l. The value of work and miscellaneous
equipment shall be allocated to Louisiana on the basis of the ratio of track
miles in Louisiana to total track miles in the case of a railroad, on the basis
of the ratio of bank miles operated in Louisiana to total bank miles operated
in the case of inland waterway transportation and on the basis of the ratio of
route miles operated in Louisiana to total route miles operated in the case of
truck and bus transportation. In the determination of bank miles, one half of
the bank mileage of navigable rivers or streams bordering on both Louisiana and
another state shall be considered Louisiana bank miles.
m. The value of other floating equipment
shall be allocated to Louisiana on the basis of the ratio of operating
equipment miles within Louisiana to the total operating equipment miles, for
the particular equipment to be allocated. In the determination of Louisiana
operating equipment miles, one half of the mileage of all navigable rivers or
streams bordering on both Louisiana and another state shall be considered
Louisiana operating equipment miles.
3. Insufficient Records. In any case where
the information necessary to determine the ratios listed above is not readily
available from the taxpayer's records, the secretary, in his discretion, may
permit or require the allocation of such equipment by any method deemed
reasonable by him.
C. Wage Ratio. Salaries, wages and other compensation for personal services as used in R.S. 47:287.95 includes only compensation paid to employees or to a deferred plan for the benefit of employees of the taxpayer for services rendered in connection with the production of net apportionable income.
D. Revenue Ratio. This ratio is generally composed of sales, charges for service, and other gross apportionable income. Neither allocable income nor income excluded from gross income, such as interest and dividends, is included in the ratio. For all formulas except that provided by R.S. 47:287.95(F), the revenue ratio consists of the ratio of the gross apportionable income of the taxpayer from Louisiana sources to the total gross apportionable income of the taxpayer. For the formula provided by R.S. 47:287.95(F), the revenue ratio consists of the ratio of net sales made in the regular course of business and other gross apportionable income attributable to this state to the total net sales made in the regular course of business and other gross apportionable income of the taxpayer. Sales not made in the regular course of business are not included in the formula provided by R.S. 47:287.95(F).
1. Revenue from Transportation other than Air
Travel. Gross apportionable income attributable to Louisiana from
transportation other than air includes all such revenue derived entirely from
sources within Louisiana plus a portion of revenue from transportation
performed partly within and partly without Louisiana, based upon the ratio of
the number of units of transportation service performed in Louisiana to the
total of such units. Revenue from transportation exclusively without Louisiana
shall not be included in gross apportionable income attributed to Louisiana.
Gross apportionable income attributable to Louisiana shall be computed
separately for each of the four classes enumerated below.
a. A unit of transportation shall consist of
the following:
i. in the case of the
transportation of passengers, the transportation of one passenger a distance of
1 mile;
ii. in the case of the
transportation of liquid commodities, including petroleum or related products,
the transportation of one barrel of the commodities a distance of 1
mile;
iii. in the case of the
transportation of property other than liquids, the transportation of 1 ton of
the property a distance of 1 mile;
iv. in the case of the transportation of
natural gas, the transportation of one MCF or one MBTU a distance of 1
mile.
b. In any case
where another method would more clearly reflect the gross apportionable income
attributable to Louisiana, or where the above information is not readily
available from the taxpayer's records, the secretary, in his discretion, may
permit or require the use of any method deemed reasonable by him.
c. Example: ABC Corporation is in the
business of transporting natural gas as a common carrier. During the year 2005,
ABC entered into five transactions. In the first transaction 1 million MMCF was
transported from Texas, through Louisiana, to Mississippi. The total distance
transported was 500 miles, of which 200 miles was in Louisiana. The charge for
the transportation was $250,000. In the second transaction 1 million MMCF was
transported from one point in Louisiana to another point in Louisiana, a
distance of 150 miles, for a charge of $150,000. In the third transaction 1
million MMCF was transported from one point in Texas to another point in Texas,
a distance of 500 miles, for a charge of $250,000. In the fourth transaction 1
million MMCF was transported from a point in Louisiana to a point in another
state for a charge of $500,000. The total distance transported was 1,000 miles,
of which 100 miles were in Louisiana. In the fifth transaction 1 million MMCF
was transported from a point in Louisiana to a point in another state for a
charge of $250,000. The distance transported was 500 miles, of which 100 was in
Louisiana. The portion of the gross apportionable income attributed to
Louisiana would be computed as follows.
|
Louisiana Amount |
|
|
First Transaction - 200/500 x $250,000 = |
$100,000 |
|
Second Transaction - entirely from Louisiana = |
150,000 |
|
Third Transaction - neither entirely nor partially in Louisiana |
-0- |
|
Fourth Transaction - 100/1,000 x $500,000 = |
50,000 |
|
Fifth Transaction - 100/500 x $250,000 = |
50,000 |
|
Louisiana Income From Transportation of Natural Gas |
$350,000 |
2. Revenue from Telephone,
Telecommunications, and Other Similar Services
a. Gross apportionable income attributable to
Louisiana from providing telephone, telecommunications, and similar services
shall include, but is not limited to:
i.
revenue derived from charges for providing telephone "access" from a location
in this state. "Access" means that a call can be made or received from a point
within this state. An example of this type of receipt is a monthly subscriber
fee billed with reference to a service address located in the state and without
regard to actual usage;
ii. revenue
derived from charges for unlimited calling privileges, if the charges are
billed by reference to a service address located in this state;
iii. revenue from intrastate telephone calls
or other telecommunications, except for mobile telecommunication services,
beginning and ending in Louisiana;
iv. revenue from interstate or international
telephone calls or other telecommunications, except for mobile
telecommunication services, either beginning or ending in Louisiana if the
service address charged for the call or telecommunication is located in
Louisiana, regardless of where the charges are billed or paid;
v. revenue from mobile telecommunications
service:
(a). revenue from mobile
telecommunications services shall be attributed to the place of primary use,
which is the residential or primary business street address of the
customer;
(b). if a customer
receives multiple services, such as multiple telephone numbers, the place of
primary use of each separate service shall determine where the revenue from
that service is attributed;
(c).
revenue from mobile telecommunications services shall be attributed to
Louisiana if the place of primary use of the service is Louisiana.
b. Definitions. For the
purposes of this paragraph, the following terms have the following meanings
unless the context clearly indicates otherwise.
i.
Call-a specific
telecommunications transmission.
ii.
Customer-any person or
entity that contracts with a home service provider or the end user of the
mobile telecommunications service if the end user is not the person or entity
that contracts with the home service provider for mobile telecommunications
service.
iii.
Home Service
Provider-the facilities-based carrier or reseller with which the
customer contracts for the provision of mobile telecommunications
services.
iv.
Place of
Primary Use of
Mobile Telecommunications Service-the
street address representative of where the customer's use of mobile
telecommunications service primarily occurs. This address must be within the
licensed service area of the home service provider and must be either the
residential or the primary business street address of the customer. The home
service provider shall be responsible for obtaining and maintaining the
customer's place of primary use as prescribed by
R.S.
47:301(14)(i)(ii)(bb)(XI).
v.
Service Address- the
address where the telephone equipment is located and to which the telephone
number is assigned.
vi.
Telecommunications-the electronic transmission, conveyance or
routing of voice, data, audio, video, or any other information or signals to a
point, or between or among points, by or through the use of any medium such as
wires, cables, satellite, microwave, electromagnetic wires, light waves or any
combination of those or similar media now in existence or that might be
devised, but telecommunications does not include the information content of any
such transmission.
vii.
Telecommunications Service-providing telecommunications,
including service provided by telecommunication service resellers, for a charge
and includes telephone service, telegraph service, paging service, personal
communication services and mobile or cellular telephone service, but does not
include electronic information service or Internet access service.
3. Attribution of Sales
Made in the Regular Course of Business
a.
Sales made in the regular course of business attributable to Louisiana under
R.S.
47:287.95 are those sales where the goods,
merchandise or property are received in Louisiana by the purchaser. Similarly,
where the goods, merchandise or property are received in some other state, the
sale is attributable to that state. Sales made in the regular course of
business include all sales of goods, merchandise or product of the business or
businesses of the taxpayer. They do not include the sale of property acquired
for use in the production of income. Where a taxpayer under a contract performs
essentially a management or supervision function and receives a reimbursement
of his costs plus a stipulated amount, the amounts received as reimbursed costs
are not sales although the contract so designates them. The stipulated amount
constitutes other gross apportionable income and shall be attributed to the
state where the contract was performed. Where goods are delivered into
Louisiana by a public carrier, or by other means of transportation, including
transportation by the purchaser, the place at which the goods are ultimately
received after all transportation has been completed shall be considered as the
place at which the goods are received by the purchaser. The transportation in
question is the initial transportation relating to the sale by the taxpayer,
and not the transportation relating to a sale or subsequent use by the
purchaser.
b. Where the goods are
delivered by the seller in his own equipment, it is presumed that such
transportation relates to the sale. Where the goods are delivered by a common
or contract carrier, whether shipped F.O.B. shipping point, and whether the
carrier be a pipeline, trucking line, railroad, airline or some other type of
carrier, the place where the goods are ultimately received by the purchaser
after the transportation by the carrier has ended is deemed to be the place
where the goods are received by the purchaser.
c. Where the transportation involved is
transportation by the purchaser, in determining whether or not the
transportation relates to the sale by the taxpayer, consideration must be given
to the following principles.
i. To be related
to the initial sale, the transportation should be commenced immediately.
However, before a lapse of time is conclusive, consideration must be given to
the nature and character of the goods purchased, the availability of
transportation, and other pertinent circumstances.
ii. The intent of the parties to the sale
must also be considered. The intent and purpose of the purchaser may be
determined directly, or by an evaluation of the nature and scope of his
operation, customs of the trade, customary activities of the purchaser, and all
pertinent actions and words of the purchaser at the time of the sale.
iii. In order for the transportation by the
purchaser to be related to the initial sale by the taxpayer to the purchaser,
such transportation must be generally the same in nature and scope as that
performed by the taxpayer or by the carrier. There is no difference between a
case where a taxpayer in Houston ships F.O.B., Houston, to a purchaser in Baton
Rouge, by common carrier, and a case where all facts are the same except that
the purchaser goes to Houston in his own vehicle and returns with the goods to
Baton Rouge.
d.
Generally, transportation by public carrier pipelines is accorded the same
treatment as transportation by any other type of public carrier. However,
because of the nature and character of the property, the type of carrier, and
customs of the trade, the natural resources in the pipeline may become
intermixed with other natural resources in the pipeline and lose their
particular identity. Where delivery is made to a purchaser in more than one
state, or to different purchasers in different states, peculiar problems of
attribution arise. In solving such problems consideration must be given to the
following principles.
i. Where it can be
shown that a taxpayer in one state sold a quantity of crude oil to a purchaser
in another state, and the oil was transported to the purchaser by pipeline
carrier, the sale will be attributed to the state where the crude oil is
received by the purchaser, even though the crude oil delivered might not be the
identical oil sold because of commingling in the pipeline. Custom of the trade
indicates the purchaser buys a quantity of oil of certain quality rather than
any specific oil.
ii. In situations
involving several deliveries in several different states to one or more
purchasers, the general rules should be applied with logic and common
sense.
e. In determining
the place of receipt by the purchaser after the initial transportation has
ended, peculiar problems may be created by the storage of the property
purchased immediately upon purchase at a place other than the place of intended
use. The primary problem created by such storage is in determining whether or
not the transportation after storage relates to the sale by the taxpayer.
Generally, the rules and principles set forth above will control where the
storage is of temporary nature, such as that necessitated by lack of
transportation, by change from one means of transportation to another, or by
natural conditions. In cases where the storage is permanent or semi-permanent,
delivery to the place of storage concludes the initial transportation, and the
sale is attributed to the place of storage.
4. Attribution of Gains from Sales Not Made
in the Regular Course of Business
a. The net
profit from sales not made in the regular course of business shall be included
in the ratios provided by
R.S.
47:287.95(C) and
(D).
b. The net profit from the sale of a mineral
lease, royalty interest, oil payment, or other mineral interest shall be
attributed to the state or states in which the property subject to such mineral
interest is located.
c. The net
profit from the sale of other intangibles shall be attributed to the state or
states in which the intangible has acquired a business situs if the intangible
has been so used in connection with a business as to acquire a business situs,
or, in the absence of such a business situs, shall be at the commercial
domicile of the taxpayer.
d. The
net profit from the sale of the tangibles shall be attributed to the state or
states in which the tangible is located at the time of sale.
5. Exchanges. In transactions in
which raw materials, products, or merchandise are transferred to another party
at one location in exchange for raw materials, products, or merchandise at
another location in agreements requiring the subsequent replacement with
similar property on a routine, continuing, or repeated basis, all such
transactions shall be carefully analyzed in order to determine whether they
constitute sales that should be included in the sales ratio or whether they
constitute exchanges which are not sales and should be excluded from the sales
ratio.
6. Recoveries and Reductions
of Expense. Transactions that are actually recoveries of expenses or
transactions that are part of a sequence of transactions for the purpose of
managing risk, preventing loss, securing product, securing market or protecting
profit shall not be considered gross apportionable income for purposes of
determining the Louisiana apportionment percent. Examples of such transactions
include, but are not limited to:
a.
Corporation A rents retail space in a shopping mall. The glass in the front
door of the shop has broken and Corporation A is unable to immediately contact
the building owner. Corporation A has the glass replaced and is later
reimbursed by the building owner. The reimbursement is not gross apportionable
income for purposes of determining the Louisiana apportionment
percent;
b. Corporation B buys and
sells wheat. As part of securing a supply of wheat at the best possible price
Corporation B will, when it believes prices will be rising in the future,
purchase options to buy a fixed quantity of wheat at a fixed price on a fixed
date in the future. At times market conditions will change subsequent to the
purchase of an option and, believing that prices will fall and the wheat can be
bought even cheaper than the option price in the future, the option will be
sold. The amount received from the sale of the option is not gross
apportionable income for purposes of determining the Louisiana apportionment
percent. The amount received relates to the ultimate cost of goods
sold;
c. Corporation C grows and
sells wheat. It knows that at harvest it will have at least a certain amount of
wheat that must be sold. To ensure a market for its wheat at harvest
Corporation B buys options to sell fixed quantities of wheat at fixed prices at
harvest time. At times market conditions will change subsequent to the purchase
of an option and, believing that there will be sufficient buyers willing to pay
a sufficient price at harvest time, the option will be sold. The amount
received from the sale of the option is not gross apportionable income for
purposes of determining the Louisiana apportionment percent. The amount
received relates to marketing expenses;
d. Corporation D grows, buys and sells wheat.
To manage market risk in its business Corporation D engages in complex,
sophisticated transactions involving options, futures contracts and various
derivative contracts. Any amounts received in the course of these risk
management transactions are not gross apportionable income for the purposes of
determining the Louisiana apportionment percent. The amounts received relate to
insurance expenses.
AUTHORITY NOTE: Promulgated in accordance with R.S. 47:287.95, R.S. 47:287.785, and R.S. 47:1511.
Disclaimer: These regulations may not be the most recent version. Louisiana may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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